Israel must retain at least 400 billion cubic meters (bcm) of its offshore natural gas reserves for domestic use between now and 2017, and producers can export the surplus, the government-appointed Zemach Committee recommended in its preliminary report Thursday.New limits should then be set each year until 2042, in accordance with the Energy and Water Ministry’s demand forecasts, the committee said. It estimated that Israel would need between 420- 540bcm of natural gas until 2040, most of it for electricity production and the remainder for industry and transportation.The committee determined that fields containing more than 200 bcm (7 trillion cubic feet) of natural gas will supply at least half of their reserves to the domestic market. Fields containing 100- 200bcm will supply at least 40 percent, and fields containing 50-100 bcm will supply at least 25%. Furthermore, natural gas developers will be required to safeguard an additional 15% of reserves as protection.Israel’s two largest offshore fields, Tamar and Leviathan, contain an estimated 250bcm and 450 bcm of natural gas, respectively. It is expected that gas will begin flowing from Tamar in 2013 and from Leviathan in 2017.Delek Drilling and Avner Oil Exploration, which hold a 15.625% each in the Tamar prospect and a 22.67% share each in the Leviathan prospect, reacted negatively to the report.In a joint statement, they stated: “Exportation is a key condition for the continued development of Israeli energy.The amount of gas allocated to exports must be expanded in order to strike the right balance between Israel’s energy independence and hidden economic and geo-political benefits of gas exportation.”In response to the report, Environmental Protection Ministry Dir-General Alona Shefer-Karo sent a letter to the committee members, detailing her ministry’s criticisms of its stipulations.The committee’s evaluation of domestic natural gas demand was too low, and should have been closer to a figure like 550 bcm, according to Shefer-Karo’s assessment. In the category of transportation, the committee assumed that in 2040, more than half of Israel’s vehicles will continue to be driven on petrol and diesel, and only one-third on natural gas – with the remaining being electrically powered.“Given that vehicles powered with refined petroleum are the main cause of air pollution in city centers, and in light of government policies to promote transportation alternatives to oil, the base scenario is far from reflecting the desired future for Israel’s transportation system,” Shefer-Karo wrote.In addition to assuming that most private cars and all public transportation vehicles will be running on natural gas by then, the committee should also take into account that many household needs might require natural gas, she added.With a higher projected demand, the supply allocations to the local market also must be significantly higher, according to the ministry.The ministry also objected to the domestic delivery obligation amount for large-sized fields, and felt that the numbers should be more incremental than a simple 50% requirement for fields with 200 bcm, and above.With this low requirement, the largest fields, like Leviathan, would be able to stockpile huge amounts of gas for export, thereby reducing incentives for exploration and export in smaller fields, Shefer-Karo said.Instead, she argued, fields over 400bcm should be required to preserve 80% of their supplies for local use; those between 300-400 bcm should preserve 70%; those between 200-300 bcm, 60%; those between 100-200bcm, 50%, those between 50-100bcm, 40%; and those under 50bcm, 30% for local markets.As far as exports go, the ministry also disapproved any LNG facility establishment without a thorough investigation of all environmental implications – such as those on beaches and landscapes.Meanwhile, although acknowledging that the report prioritized Israeli consumers for natural gas purposes, the ministry said that the details were “vague and insufficient” as to exactly how this prioritization would be accomplished.In addition, if the government must require natural gas suppliers to provide the local market with more than the amount allotted for this sector (during a natural gas shortage, for example), the suppliers should only receive normal market prices without additional federal compensation, Shefer-Karo stressed.Committee Chairman Shaul Zemach and his team will accept public submissions until May 6, and will submit their final report to the government on June 7.